Carriers unite to keep KPNQwest network alive

Several telecommunications companies have provided funds to keep a key part of bankrupt KPNQwest NV’s network running until at least July 1, Koninklijke KPN NV said Monday.

The carriers, which are all users of KPNQwest’s 18-country, 25,000-kilometer fiber-optic network, have set up a foundation to support their efforts called Customer Support KPNQwest. The foundation has been approved by KPNQwest’s liquidators and sufficient funds have been pledged to maintain a key part of the network in the northwest of Europe until July 1, KPN, of The Hague, Netherlands, said in a statement.

Keeping the network up gives customers additional time to find an alternative service provider. It should also provide KPNQwest’s liquidators with a chance to sell a business that is still operational, maximizing proceeds for banks that provided loans to the company and other creditors.

The Amsterdam Internet Exchange (AMS-IX), a major hub of Internet connections in the Netherlands and one of the companies that provides network services to KPNQwest, confirmed that the foundation is paying KPNQwest’s bills in order to help keep its network operational.

“The KPNQwest Customer Support foundation is paying us,” said AMS-IX spokesman Job Witteman. “As far as we can see, there are no delays (on the KPNQwest network).”

KPNQwest’s liquidators earlier this month raised money from customers and said they could keep the network running until July 1, so long as its suppliers cooperated and didn’t demand payment of bills. However, some suppliers, which include electricity companies and hardware vendors, demanded cash, and banks held onto the funds paid by customers to keep the light on at KNPQwest, leading to uncertainty about the company’s status.

On Friday, the liquidators, after losing a court case against the lending banks, told staff at KPNQwest, in Hoofddorp, Netherlands, to stop working and said the network would be shutdown. The funding move by the group of telecommunications companies seems to have prevented that closure. The banks, meanwhile, have said they suspect fraud at KPNQwest and have asked for an investigation.

Negotiations to sell the KPNQwest network, which experts say is Europe’s largest, carrying more than 25 percent of the continent’s Internet traffic, are continuing. AT&T Corp. and a group of investors are the most likely candidates, according to media reports. The KPNQwest network could also be sold in pieces. AT&T has declined to comment.

KPNQwest went bankrupt in late May after a plan to sell certain assets to meet urgent financial obligations failed. The company, founded in November 1998 by KPN and U.S.-based Qwest Communications International Inc., invested heavily in its network and won large customers including Microsoft Corp. and Dell Computer Corp. The once US$40 billion company went into a financial tailspin when demand failed to meet its expectations and its founders and banks withdrew support.

(Maarten Reijnders of WebWereld Netherlands, an IDG News Service affiliate, contributed to this report.)